The SME segment is the backbone of the economy. According to the Federation of Small Businesses there were 5.8 million small businesses at the start of 2019 and SMEs accounted for 99.9 per cent of the business population.

A recent COVID-19 survey of UK SMEs conducted by McKinsey (2020), shows more than half view the country’s economy as very or extremely weak, and half expect market stagnation or recession. A staggering 80 percent of SMEs say their revenues are declining.

And it’s not only the UK. SMEs on a global basis face a significant decline in sales, cashflow and supply chain disruption - key concerns for small businesses in these challenging times that are endeavouring to stay afloat.

Faster access to lending required

Despite the efforts of governments across the globe to support with COVID-19 emergency lending provision, traditional banks are unable to provide loans to the SMEs quick enough for those who need funding immediately. This is clearly not the intention of these traditional banks, but rather the barrier caused by an inflexible IT architecture limited by vendor lock-in.

What businesses need is a lending solution that can provision for fast and smooth access to support them in these challenging times. COVID-19 has accelerated the need for banks to rethink their digital processes, as it is clear that many lack the flexibility and technology to be able to adapt their products and services at speed.

Investing in the right technology

So what is stopping banks from lending to SMEs?

The reason why banks are not able to lend quick enough is because they have become burdened with underperforming systems and outdated monolithic architectures that barely support key processes, at a time when institutions face renewed pressure to reduce costs and adjust to volatile conditions. These inflexibilities can mainly be attributed to high dependencies on internal monolithic systems, either built inhouse or supplied by traditional core banking vendors. 

Traditional monoliths are designed in a way that every change in the process or product needs additional development of the system, resulting in lost time, cost and resources – slowing down the bank’s Central Banking System (CBS). This is detrimental to the bank, as these systems not only drive the banks’ day-to-day operations but also serve as the core IT platform for new capabilities and growth. This causes disruption to the customer’s experience and a failure by the bank to provision for lending needs.  

Responding to lending demand to stay competitive

For banks and financial institutions to stay competitive they must support their customers in a timely fashion, or face becoming irrelevant. A digital and omnichannel approach not only results in customer satisfaction, but also helps them increase stakeholder value by reducing the overall cost and improving efficiencies.

By harnessing next-generation CBS platforms in the cloud, banks can deploy and integrate with emerging technologies with ease. A CBS cloud native platform can also offer many technological benefits, one in particular is elasticity and high availability, making deployments easier, smoother and on-demand. 

At the same time, a platform can connect banks with ecosystem third parties using plug and play integration. Open Banking through the opening up of APIs is enabling banks to easily integrate their internal systems with other third parties, improving the speed and the variety of products and services offered to the end-user.

Removing vendor dependency through innovation

A ready-to-use cloud-native platform that can modify existing processes and deploy new ones, while having the ability to be customised and understood by people with a non-technical background, removes the need for an external agency or vendor - speeding up the banks’ lending processes to provision for SMEs.

A lending quote that can be made available in days rather than weeks will help to keep businesses resilient, while ensuring the survival of traditional banks and financial institutions.

It’s clear that for banks to keep ahead of the competition, innovation, digital adoption and speed to market are the keys to success.